Iraq Wins US Order Seizing Kurdish Oil Off Texas

The Iraqi Oil Ministry persuaded a U.S. judge to issue an order for the seizure of more than $100 million of oil in a tanker waiting off Galveston, Texas, that it claims was illegally pumped from wells in Kurdistan.

Kurdish officials “misappropriated” more than 1 million barrels of oil from northern Iraq and exported it through a Turkish pipeline, according to a complaint filed yesterday in federal court in Houston.

U.S. Magistrate Judge Nancy Johnson of Galveston hours later issued an order and arrest warrant authorizing U.S. marshals to seize the cargo and have it moved ashore for safekeeping until the dispute is resolved.

The U.S. officially recognizes Kurdistan as part of Iraq, although the Kurdish people have jockeyed with the Baghdad-based national government for autonomy for more than a decade. Oil revenues from the northern oil fields could fuel Kurdistan’s fight for independence.

The Iraqi government warned Kurdish officials to stop the illegal exporting through Turkey, which began in December, according to the complaint. The crude shipment, currently docked off Galveston, left Ceyhan, Turkey, on June 23, and has “changed destinations multiple times” while at sea, according to the filing.

If a U.S. refinery accepts shipment of the crude, it will send a signal to the rest of the world that it is acceptable to do business with the Kurdish government, said Carl Larry, president of Oil Outlooks & Opinions LLC.

“It opens the door to some kind of breakup in that region where you could have a separate Kurdistan and Iraq,” Larry said in a telephone interview. “It’s definitely going to create that separation, and more people are going to recognize that and respect it.”

The Iraqi Oil Ministry asked U.S. marshals to oversee lightering operations to remove crude from the tanker and store it onshore at Iraq’s expense. The proposed warrant filed with the complaint didn’t ask to seize the United Kalavrvta, the Marshall Islands-flagged tanker, which is too large to enter the Houston Ship Channel and offload cargo directly.

A lightering contract had already been signed, according to the complaint. The tanker was cleared by the U.S. Coast Guard to proceed with offloading, the agency said.

Oil producers are actively pursuing resources in coordination with the Kurdistan Regional Government, which estimates the northern territory holds 45 billion barrels of oil reserves. The Kurdish government expanded its control over the country’s resources in early June, when Kurdish Peshmerga armed forces took control of northern Iraq’s key oil hub, Kirkuk, after militants routed the Baghdad government’s army.

The Iraqi Oil Ministry persuaded a U.S. judge to issue an order for the seizure of more than $100 million of oil in a tanker waiting off Galveston, Texas, that it claims was illegally pumped from wells in Kurdistan.